I have a husband and wife who have a partnership. They both were 1099 from the same company. In 2024 he got a w2 job. Since their partnership only has 1 1099 instead of 2 is his partnership income considered passive not subject to self-employment tax?
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Lots of things wrong here..
They have a partnership, yet the 1099s are issued to the partners, not the partnership?
Facts and circumstances determine if his share of the income is passive, not how many forms are issued... hopefully forms to the partnership, not the partners.
Chris -
The 1099nec under recipient it has my clients name and underneath it has the partnerships nameComment
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"under recipient it has my clients name and underneath it has the partnerships name"
Can you find the tax ID of the recipient anywhere on the form?"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
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Yes under recipients itin is the partnerships ein numberComment
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Based on this information does the husband have passive from the partnershipComment
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It seems like the 1099-NEC was issued to the individual, not the Partnership. Did the "Partnership" actually do the work, or was it the individual? My interpretation of everything you have said leans towards it is a Sole Proprietorship (and used to be two Sole Proprietorships). But maybe I'm wrong.
*IF* it was the Partnership that did the work (which as I said, doesn't seem to be the case, but maybe I'm wrong): If the husband is an owner and did not Materially Participate, yes, that is Passive Income.
However, "passive" is different than "subject to self-employment tax". Nothing you have said gives any indication that he is a "Limited Partner" that is not subject to SE tax. The fact he previously Materially Participated in the business is an indication he might not be a Limited Partner.Comment
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"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
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The wife did the work but the company received the 1099nec in the company's name and the company's ein number. So what I am hearing is that the husband had non passive income but still subject to self-employment taxComment
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So even though he has passive income he is still subject to self-employment tax?Comment
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No. You just assumed the OP was using technically accurate terms, while I did not.
To rwm221:
you haven't told us anything about the partnership agreement, whether there were guaranteed payments, etc. Frankly, without knowing any more, I would wager a small amount that these two workers actually should be treated as employees, not independent contractors, but that's not your problem.
Let me ask you this: in 2023, was he subject to SE tax on his share of partnership income? If so, then what do you think changed in 2024, other than the partnership may have received a different amount of income (which is going to happen for any business entity)? Hint: the number of 1099-NECs received has nothing to do with it.
Last edited by Rapid Robert; 04-25-2025, 05:39 PM."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
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If he is not a Limited Partner, yes, his box 1 Partnership Income should be subject to SE tax, unless other special circumstances apply. Box 14 should reflect that. I'm not aware of anything that would exempt him from it.Comment
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This is the first time that I am doing their taxes. Here is their second major problem. The last person that did their taxes for 2 years filed them as an s-Corp so they paid no se taxes. I looked at the paperwork from the IRS and it says they are a partnership not an s-corp. They even received a letter from the IRS informing them their taxes were misfiled, but since their k-1's went through on their personal return they thought nothing of it. I want to be sure I do it correctly.Comment
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- Sorry When I mentioned they received a letter about taxes being misfiled, I meant they received the letter about the business taxes being misfiled. When I mentioned about them receiving 2 1099's last year from the same company even though the 1099r's had their company name and ein number on the 1099.One was for the work she did, and one was for the work her husband did for the same company. Hope that makes sense
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